US, EU Pact Opposed By Congress, Labor Unions

An "open-skies" deal between the US and the EU, a decade in negotiations and in limbo since written last November, still faces serious opposition. Labor unions and some airlines object to an administration-requested change in current rules that the deal's opposition says will allow foreign ownership in US airlines.

The Bush administration wants to change the rules restricting foreign investment and management of US air carriers because, they say, the EU won't agree to the proposed open-skies pact otherwise.

The DOT's Undersecretary for Policy Jeff Shane spoke at the International Aviation Club in Washington saying "If we lose the current open-skies agreements, we face the very real prospect of dismantling the US-EU airline alliance structure that provides so much international aviation competition today, as well as the emerging cross-border airline mergers."

According to a Financial Times report, the 60-year-old rules -- the Warsaw Convention -- that govern international relationships between airlines require that carriers be "effectively owned and controlled" by citizens of the state in which they are based. But a European Court of Justice ruled that contravenes EU law.

EU member states say the "nationality clause" worked when the Warsaw Convention was enacted, but became obsolete when the EU was formed. They say there will be "massive disruption" if hundreds of agreements have to be renegotiated should the open-skies agreement fall apart.

FMI: www.dot.gov